Marijuana Industry Brings Compliance to a High Bar

Ensuring overall compliance with strict regulations is the next growth opportunity.

Whatever you think of it, marijuana is here to stay and coming to full legalization in a state nearest you. Controversy follows cannabis into every branch of society: political, cultural, science, health, education, legal and finance. A quick search on YouTube will show heartbreaking stories of families using marijuana to treat children with severe epilepsy. More than a hundred of these families uprooted their lives and moved to Colorado for access to Charlotte’s Web, a low-psychotropic strain proven to drastically reduce fatal seizures. The economics are also compelling. Even tiny Pacific islands see the value. The Hawaii Dispensary Alliance is projecting $80 million in medical marijuana sales over the next two years; a figure based on 40,000 registered patients.

To parents of young children, legalized recreational use of cannabis means the sky is falling with possible substance abuse issues causing another worry to lose sleep over. For others, insomnia is cured by one puff from a vaporizer. Legalization means less incarceration of marginalized groups who face a disproportionate amount of unnecessary suffering. More than 700,000 marijuana-related arrests were made in 2014, according to Drug Policy Alliance. On the medical side, here’s a blog post from American Cancer Society : “The National Institute of Health, via PubMed public medical library, has listed 10,982 research reports on cannabinoids and their ability to induce apoptosis and cause autophagy leading to programmed cancer cell death without damaging healthy tissue.”

Considered safer than aspirin, the five-million- year old cannabis sativa plant was used two-thousand years ago in China for treating ailments. Not a single reported fatality. For the record, I am not a cannabis user. I do however support responsible adult use and the establishment of safe protocols, regulation and taxation. Doing so will remove the criminal cartel element and limit the black market.

Because my business is about helping companies manage their InfoSec needs, a large portion of what we do involves governance, risk and compliance. Let’s assume we can now add the emerging billion-dollar cannabis industry to the list of highly regulated industries like healthcare, banking and insurance. Let’s act responsibly to ensure access is restricted to adult use only, and that dispensaries are held accountable and act responsibly in full compliance with mandated rules and regulations, which differ widely from state to state.

The compliance opportunity is budding for software vendors and IT service providers. Point of sale systems, “seed to sale” RFID tracking, local and cloud storage, CRM, compliance and inventory software present “green rush” opportunities.

Let’s review but a few Massachusetts regulations – some of the most stringent in the nation — to show just how regulated the compliance environment is for Registered Marijuana Dispensaries (RMDs). Nobody can just walk into a RMD. Managed by the Mass Department of Public Health, DPH sets restrictive rules for all aspects of the business: cultivation, processing, storage, testing, dispensing of marijuana in all its consumable forms.

DPH regulations require RMDs to use a single electronic system for “Real-Time Inventory” to tag and track all marijuana seeds, plants, and products, from “seed to sale,” as well as recording all dispensary agents, patients, or caregivers involved in handling or possession. Tracking must also include both plant and crop/batch identification. RMDs must keep written records for operating procedures, inventory and waste disposal.

The DPH has set the bar too high for any mom and pop business to dream of pot riches. For starters, they must file as non-profit organizations depositing an escrow of half a million dollars.

That’s after putting down a non-refundable fee of $30,000 just to apply for a license. The vast majority of applicants are rejected.

Licensing: Once granted a license, registered dispensaries must self-produce every consumable product they sell. A license to sell also includes the license to grow the plant. If they are cooking up edibles, RMDs need to comply with food handler sanitation requirements Security. Facilities must be kept locked at all times. Video must record every corner of the grow facility, kitchen, retail operations, and parking lots; even the transportation of product from hothouse to retail, and every customer delivery. Files must be securely stored, logged and shared with the DOH on demand. Alarms have to be set at all entry points and be connected to local police station. All security equipment must be tested once every 30 days and require a yearly security audit by a DPH-approved vendor.

Testing: Must be done by an independent laboratory that meets DPH approval and tested for profile and contaminants.

Transportation: Two authorized employees (themselves issued a separate license as “dispensary workers” at $500 per head) must accompany the transport. Product must be safe-locked in a container permanently attached (welded) to the vehicle itself.

Marketing: No marketing is allowed. No logos can be exhibited outside the facility, on the door of the facility, or on vials or packaging sold to consumers. Packaging must be child-proof. No sight lines are allowed into the facility via window or door.

Tracking: There are too many to mention here, but “seed to sale” tagging and POS must record every movement of the plant as it develops and moves from seedling to drying to trimming to displaying and final sale. Every patient sale needs to be logged and every disposal needs to be documented following state/local solid and liquid waste laws.

These are just a few of the DPH compliance regulations. At the Salem, MA dispensary, three checkpoints must be passed through, including a metal detector similar to what you find in court houses.

Yesterday’s image of the stoner culture, the Bob Marley references and such, is rapidly being weeded out by people with deep pockets and pinstripes. The annual Marijuana Business Conference held in Las Vegas doubles in size every year. You’ll note insurance brokers selling “Raid Coverage”, venture capitalists, law and accounting firms and licensing consultants milling about exhibitors selling wares for LED lighting, oil extractors, packaging concepts, basement grow tents, compliance software and more. We are witnessing an historical event with the creation of this entirely new economy. Software developers, data scientists, infosec experts and IT pros all stand to benefit.

About The Author:

Michelle Drolet

Michelle Drolet is founder of Towerwall, a small woman-owned data security and cannabis compliance services provider in Framingham, Mass., with clients such as CannaCare, Smith & Wesson, Covenant Healthcare and many mid-size organizations. She can be reached at [email protected]owerwall.com.